The US Supreme Court handed SpaceX a temporary, partial win in the company’s challenge to the National Labor Relations Board’s constitutionality by avoiding a key issue in its ruling on administrative enforcement.
The high court’s Thursday decision didn’t reach the question of whether the Securities and Exchange Commission’s administrative law judges are unconstitutional due to their double-layered protections against removal. That effectively leaves in place the US Court of Appeals for the Fifth Circuit’s 2022 holding that the SEC’s in-house judges violate the Constitution.
Elon Musk-owned SpaceX benefits from that circuit precedent remaining good law because both of its multi-pronged lawsuits against the NLRB contest the agency’s administrative law judges, and at least one of those cases is within the Fifth Circuit. The agency and the company have been fighting in court over whether the other lawsuit will be transferred to a California federal court, which is in the Ninth Circuit’s domain.
But the Supreme Court’s holding from its 6-3 decision in SEC v. Jarkesy appears to be much harder for SpaceX to use against the labor board, legal observers said.
The court ruled that defendants have a constitutional right to make their case to a federal jury when the SEC is seeking financial penalties. The court upheld that part of the Fifth Circuit’s decision.
In one of SpaceX’s lawsuits against the NLRB, the company makes a similar allegation that the agency’s unfair labor practice allegations brought in administrative proceedings violate its Seventh Amendment jury right. The company filed its lawsuits to block the administrative cases—the only venue that NLRB prosecutors can file ULP complaints.
On Thursday, the Supreme Court created a two-part test for when the jury right attaches to a claim brought by an agency: The claim must resemble a common law cause of action, and the remedy must be legal in nature. The court said the remedy is the more important factor.
The justices also included an exception, such that agency allegations that resemble common law claims and seek legal remedies like damages can still be handled through in-house adjudication if the case concerns “public rights.”
Weakness a Strength
One of the weaknesses of the National Labor Relations Act—that it only empowers the board to issue equitable remedies, rather than legal remedies like damages and civil penalties—helps the agency avoid the Seventh Amendment issue from Jarkesy, said Sharon Block, a former NLRB member who directs Harvard Law School’s Center for Labor and a Just Economy.
“I’m not saying parties won’t try to litigate that issue, but it seems extremely clear that this decision has no applicability to the NLRA,” she said.
Unfair labor practices also lack roots in the common law, but that hardly matters because the law is so clear on the NLRB’s inability to impose legal remedies, said Anne Marie Lofaso, a labor law professor at West Virginia University.
“There’s never been a case that says the NLRB’s remedies are anything but equity,” said Lofaso, a former attorney in the agency’s Supreme Court division. “There’s nothing.”
SpaceX’s Seventh Amendment claim keys in on the board’s expanded remedies from its 2022 decision in Thryv, Inc. That ruling applied the NLRB’s power to make aggrieved workers whole by ordering companies to pay for the consequences of their violations, such as medical bills for an employee who lost insurance after being fired illegally.
But arguing that version of a make-whole remedy is allowed by the NLRA while also triggering a Seventh Amendment jury right is a “non-serious legal theory,” Block said.
On the administrative law judge issue, the NLRB may try to distinguish its labor law complaint against SpaceX from the SEC’s case in Jarkesy, but that likely goes nowhere, said Rodger Citron, an administrative law professor at Touro University.
That would create the potential for the SpaceX case to eventually percolate to the Supreme Court and give the justices the opportunity to address the constitutional issues related to administrative law judges’ removal protections, he said.
NLRB spokesperson Kayla Blado declined to comment. SpaceX’s lawyer, Catherine Eschbach of Morgan, Lewis & Bockius LLP, didn’t immediately respond to requests for comment.
The case is SEC v. Jarkesy, U.S., No. 22-859, 6/27/24.